UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For The Quarterly Period Ended September 30, 2018

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______________ to _______________

 

Commission File Number 333-208083

 

DSwiss, Inc.

(Exact name of registrant issuer as specified in its charter)

 

Nevada   47-4215595
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

Unit 18-11, 18-12 & 18-01, Tower A, Vertical Business Suite
Jalan Kerinchi, 59200, Kuala Lumpur, Malaysia

(Address of principal executive offices, including zip code)

 

Registrant’s phone number, including area code (603) 2770-4032

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES [X] NO [  ]

 

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding twelve months (or shorter period that the registrant was required to submit such files).

YES [X] NO [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer [  ] Accelerated filer [  ] Non-accelerated filer [  ] Smaller reporting company [X]

 

Emerging growth company [X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Not Applicable

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class   Outstanding at November 13, 2018
Common Stock, $.0001 par value   206,904,600

 

 

 

 
 

 

TABLE OF CONTENTS

 

    Page
PART I FINANCIAL INFORMATION  
ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:  
  Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 F-2
  Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017 F-3
  Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2018 F-4
 

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2018 and 2017

F-5
  Notes to the Condensed Consolidated Financial Statements F-6 - F-18
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2-7
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 7
ITEM 4. CONTROLS AND PROCEDURES 7
PART II OTHER INFORMATION  
ITEM 1 LEGAL PROCEEDINGS 8
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 8
ITEM 3 DEFAULTS UPON SENIOR SECURITIES 8
ITEM 4 MINE SAFETY DISCLOSURES 8
ITEM 5 OTHER INFORMATION 8
ITEM 6 EXHIBITS 9
SIGNATURES 10

 

  1  
 

 

DSWISS, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

  Page
Condensed Consolidated Financial Statements  
   
Condensed Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017 F-2
Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2018 and 2017 F-3
Condensed Consolidated Statements of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2018 F-4
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 2018 and 2017 F-5
Notes to the Condensed Consolidated Financial Statements F-6 - F-18

 

  F- 1  
 

 

PART I FINANCIAL INFORMATION

 

Item 1. Condensed consolidated financial statements:

 

DSWISS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF SEPTEMBER 30, 2018 AND DECEMBER 31, 2017

(Currency expressed in United States Dollars (“US$”), except for number of shares)

 

    September 30, 2018     December 31, 2017  
    Unaudited     Audited  
ASSETS                
CURRENT ASSETS                
Cash and cash equivalents   $ 236,458     $ 498,516  
Trade receivables     11,721       11,741  
Prepayment and deposits     48,185       76,360  
Income tax receivables     -       886  
Inventories     27,436       19,126  
Total Current Assets     323,800       606,629  
                 
NON-CURRENT ASSETS                
Plant and equipment, net     100,030       56,634  
Intangible assets, net     10,085       10,212  
Total Non-Current Assets     110,115       66,846  
                 
TOTAL ASSETS   $ 433,915     $ 673,475  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
CURRENT LIABILITIES                
Trade payables   $ 27,849     $ 3,754  
Other payables and accrued liabilities     27,199       26,226  
Hire purchase payables     7,600       3,571  
Amount due to a director     29,246       40,541  
Total Current Liabilities     91,894       74,092  
                 
NON- CURRENT LIABILITIES                
Hire purchase payables     51,643       12,126  
                 
TOTAL LIABILITIES   $ 143,537     $ 86,218  
                 
STOCKHOLDERS’ EQUITY                
Preferred stock, $0.0001 par value, 200,000,000 shares authorized, None issued and outstanding                
Common stock, $0.0001 par value, 600,000,000 shares authorized, 206,904,600 and 206,904,600 shares issued and outstanding as of September 30, 2018 and December 31, 2017 respectively   $ 20,690     $ 20,690  
Additional paid in capital     1,395,426       1,395,426  
Accumulated other comprehensive loss     (17,429 )     (7,313 )
Accumulated profit losses     (1,124,794 )     (853,637 )
TOTAL STOCKHOLDERS’ EQUITY   $ 273,893     $ 555,166  
NON CONTROLLING INTEREST     16,485       32,091  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY   $ 433,915     $ 673,475  

 

See accompanying notes to condensed consolidated financial statements.

 

  F- 2  
 

 

DSWISS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

   

Nine months ended

September 30,

    Three months ended
September 30,
 
    2018     2017     2018     2017  
REVENUE     168,442       135,433       16,254       42,367  
                                 
COST OF REVENUE     (138,469 )     (22,706 )     (34,121 )     882  
                                 
GROSS PROFIT     29,973       112,727       (17,867)       43,249  
                                 
OTHER INCOME     4,022       678       2,292       57  
                                 
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES     (189,630 )     (168,298 )     (55,399 )     (52,774 )
                                 
OPERATING EXPENSES     (110,481 )     (143,196 )     (38,944 )     (55,916 )
                                 
OTHER OPERATING EXPENSES     (20,131 )     (8,285 )     (4,579 )     (3,835 )
                                 
LOSS BEFORE INCOME TAX     (286,247 )     (206,374 )     (114,497 )     (69,219 )
                                 
INCOME TAX PROVISION     -       -       -       -  
                                 
NET LOSS     (286,247 )     (206,374 )     (114,497 )     (69,219 )
Non-Controlling Interest     15,090       960       3,939       460  
Other comprehensive income/(loss):                                
- Foreign currency translation adjustment     (10,116 )     18,784       (9,595 )     (5,363 )
                                 
Total comprehensive loss     (281,273 )     (186,630 )     (120,153 )     (74,122 )
                                 
Net income/(loss) per share- Basic and diluted     (0.00 )     (0.00 )     (0.00 )     (0.00 )
                                 
Weighted average number of common shares outstanding – Basic and diluted     206,904,600       206,263,921       206,904,600       206,904,600  

 

See accompanying notes to condensed consolidated financial statements.

 

  F- 3  
 

 

DSWISS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

 

    COMMON STOCK     ADDITIONAL     ACCUMULATED           NON-        
    Number of shares     Amount     PAID-IN
CAPITAL
    COMPREHENSIVE
LOSS
   

ACCUMULATED

LOSSES

    CONTROLLING INTEREST     TOTAL
EQUITY
 
Balance as of December 31, 2017 (audited)     206,904,600       20,690       1,395,426       (7,313 )   $ (853,637 )   $ 32,091     $ 587,257  
Foreign currency translation adjustment     -       -       -       (10,116 )     -       -       (10,116 )
Net loss     -       -       -       -       (271,157 )     -       (271,157 )
Non-Controlling Interest     -       -       -       -       -       (15,090 )     (15,090 )
Balance as of September 30, 2018 (unaudited)     206,904,600       20,690       1,395,426       (17, 429 )     (1,124,794 )    

17,001

     

290,894

 

 

See accompanying notes to condensed consolidated financial statements

 

  F- 4  
 

 

DSWISS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(Unaudited)

 

   

Nine months ended

September 30,

 
    2018     2017  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss     (286,247 )     (206,374 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     18,334       18,431  
Amortization for intangible assets     127       234  
Loss on disposal of vehicle     2,726       -  
Changes in operating assets and liabilities:                
Income tax recovered      886       -  
Trade payables     24,095       3,680  
Trade receivables     20       (3,254 )
Other payables and accrued liabilities     973       (16,242 )
Inventories     (8,826 )     (18,972 )
Prepaid expenses and deposits     28,175       (8,415 )
Net cash used in operating activities     (219,737 )     (230,912 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Purchase of plant and equipment     (83,512 )     -  
Purchase of intangible assets     -       (756 )
Proceeds from disposal of vehicle     19,056       -  
Net cash used in investing activities     (64,456 )     (756 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
(Repayment to)/Advance from directors     (11,295 )     9,200  
Issuance of share capital     -       296  
Additional paid in capital     -       638,104  
Convertible note payables     -       (638,400 )
Repayment of hire purchase     (17,532     (2,938 )
Proceeds from hire purchase     61,078       -  
                 
Net cash provided by financing activities     32,251       6,262  
                 
Effect of exchange rate changes on cash and cash equivalent     (10,116 )     13,462  
                 
Net decrease in cash and cash equivalents     (262,058 )     (211,944 )
Cash and cash equivalents, beginning of period     498,516       782,963  
CASH AND CASH EQUIVALENTS, END OF PERIOD     236,458       571,019  
SUPPLEMENTAL CASH FLOWS INFORMATION                
Income taxes paid     -       -  
Interest paid     710       -  

 

See accompanying notes to condensed consolidated financial statements.

 

  F- 5  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

1. DESCRIPTION OF BUSINESS AND ORGANIZATION

 

DSwiss, Inc. is organized as a Nevada limited liability company, incorporated on May 28, 2015. For the purposes of financial statement presentation, DSwiss, Inc. and its subsidiaries are herein referred to as “the Company” or “we”. The principal activity of the Company and its subsidiaries is to supply high quality beauty products directly to clients through wholly owned subsidiaries. Our beauty supplies include, but are not limited to, beverages to assist in weight loss, anti-aging cream, and products designed to improve the overall health and wellness of clients.

 

The accompanying unaudited condensed consolidated financial statements of DSwiss, Inc. at September 30, 2018 and 2017 have been prepared in accordance with generally accepted accounting principles (“GAAP”) for interim financial statements, instructions to Form 10-Q, and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our annual report on Form 10-K for the year ended December 31, 2017. In management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation to make our financial statements not misleading have been included. The results of operations for the periods ended September 30, 2018 and 2017 presented are not necessarily indicative of the results to be expected for the full year. The December 31, 2017 balance sheet has been derived from our audited financial statements included in our annual report on Form 10-K for the year ended December 31, 2017.

 

We have historically conducted our business through DSwiss Sdn Bhd, a private limited liability company, incorporated in Malaysia. DSwiss Holding Limited, incorporated in Seychelles, is an investment holding company with 100% equity interest in DSwiss (HK) Limited, a company incorporated in Hong Kong, which subsequent hold 100% equity interest in DSwiss Sdn. Bhd. On August 31, 2015, DSwiss, Inc. was restructured to be the holding company parent to, and succeed to the operations of, DSwiss Holding Limited. The former unit holder of DSwiss Holding Limited became the unit holder of DSwiss, Inc. and DSwiss Holding Limited became a wholly-owned subsidiary of DSwiss, Inc. This transaction was accounted for as a transaction among entities under common control and the assets, liabilities, revenues and expenses of DSwiss Holding Limited were carried over to and combined with DSwiss, Inc. at historical cost, and as if the transfer occurred at the beginning of the period. Prior periods have been retrospectively adjusted for comparative purposes.

 

We have invested in DSwiss Biotech Sdn Bhd, a Company incorporated in Malaysia, and owned 40% equity interest. We have invested in DS Asia Co., Ltd, incorporated in Thailand, and owned 49% equity interest. We have incorporated a company namely DSwiss International Trading (Shenzhen) Limited in China, with 100% equity interest.

 

The Company, through its subsidiaries and its variable interest entities (“VIEs”), mainly supplies high quality beauty products. Details of the Company’s subsidiaries and associates:

 

    Company name   Place and date of incorporation   Particulars of issued
capital
  Principal activities   Proportional of ownership interest
and voting power
held
 
                       
1.   DSwiss Holding Limited   Seychelles,
May 28, 2015
  1 share of ordinary share of US$1 each   Investment holding     100 %
                         
2.   DSwiss (HK) Limited   Hong Kong,
May 28, 2015
  1 share of ordinary share of HK$1 each   Supply of beauty products     100 %
                         
3.   DSwiss Sdn Bhd   Malaysia,
June 10, 2011
  2 shares of ordinary share of RM 1 each   Supply of beauty products     100 %
                         
4.   DSwiss Biotech Sdn Bhd(1)   Malaysia,
March 17, 2016
  250,000 shares of ordinary share of RM 1 each   Supply of biotech products     40 %
                         
5.   DS Asia Co., Ltd(1)   Thailand,
April 27, 2016
  20,000 shares of ordinary share of THB 25 each   Trading Beauty products     49 %
                         
6.   DSwiss International Trading (Shenzhen) Limited
德瑞絲國際貿易(深圳)有限公司
  PRC,
June 21, 2016
  413,392 shares of ordinary share of RMB 1 each   Trading Beauty products     100 %

 

(1) Based on the contractual arrangements between the Company and other investors, the Company has the power to direct the relevant activities of these entities unilaterally, and hence the Company has control over these entities.

 

  F- 6  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of presentation

 

The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

The Company has adopted its fiscal year-end to be December 31.

 

Basis of consolidation

 

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries and its VIEs in which the Company is the primary beneficiary. All inter-company accounts and transactions have been eliminated upon consolidation.

 

Use of estimates

 

Management uses estimates and assumptions in preparing these financial statements in accordance with US GAAP. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities in the balance sheets, and the reported revenue and expenses during the periods reported. Actual results may differ from these estimates.

 

Revenue recognition

 

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, “Revenue Recognition” , the Company recognizes revenue from sales of goods when the following four revenue criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) selling price is fixed or determinable; and (4) collectability is reasonably assured.

 

Revenue from supplies of beauty products is recognized when title and risk of loss are transferred and there are no continuing obligations to the customer. Title and the risks and rewards of ownership transfer to and accepted by the customer when the products are collected by the customer at the Company’s office. Revenue is recorded net of sales discounts, returns, allowances, and other adjustments that are based upon management’s best estimates and historical experience and are provided for in the same period as the related revenues are recorded. Based on limited operating history, management estimates that there was no sales return for the period reported.

 

Cost of revenue

 

Cost of revenue includes the purchase cost of retail goods for re-sale to customers and packing materials (such as boxes). It excludes purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and other costs of distribution network in cost of revenues.

 

Shipping and handling fees

 

Shipping and handling fees, if billed to customers, are included in revenue. Shipping and handling fees associated with inbound and outbound freight are expensed as incurred and included in selling and distribution expenses. Shipping and handling fees are expensed as incurred for the nine months ended September 30, 2018 were $2,555, while for the nine months ended September 30, 2017 were $2,411.

 

  F- 7  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

Selling and distribution expenses

 

Selling and distribution expenses are primarily comprised of travelling and accommodation, transportation fees such as petrol, toll and parking and shipping and handling fees.

 

Cash and cash equivalents

 

The Company consider all highly liquid instruments with a maturity of three months or less at the time of issuance to be cash equivalent.

 

Inventories

 

Inventories consisting of products available for sell, are stated at the lower of cost or market value. Cost of inventory is determined using the first-in, first-out (FIFO) method. Inventory reserve is recorded to write down the cost of inventory to the estimated market value due to slow-moving merchandise and damaged goods, which is dependent upon factors such as historical and forecasted consumer demand, and promotional environment. The Company takes ownership, risks and rewards of the products purchased. Write downs are recorded in cost of revenues in the Condensed Consolidated Statements of Operations and Comprehensive Income.

 

Property and equipment

 

Property and equipment are stated at cost less accumulated depreciation and impairment. Depreciation of plant, equipment and software are calculated on the straight-line method over their estimated useful lives or lease terms generally as follows:

 

Classification   Estimated useful lives
Computer and software   5 years
Furniture and fittings   5 years
Office equipment   10 years
Motor vehicle   5 years
Renovation   5 years

 

Expenditures for maintenance and repairs are expensed as incurred.

 

Intangible assets

 

Intangible assets are stated at cost less accumulated amortization. Intangible assets represented the registration costs of trademarks in Hong Kong, China, and Malaysia, which are amortized on a straight-line basis over a useful life of five years.

 

The Company follows ASC Topic 350 in accounting for intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets’ carrying amounts. There is no impairment losses recorded on intangible assets for the nine months ended September 30, 2018.

 

Income taxes

 

Income taxes are determined in accordance with the provisions of ASC Topic 740, “ Income Taxes ” (“ASC Topic 740”). Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. Any effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

 

ASC 740 prescribes a comprehensive model for how companies should recognize, measure, present, and disclose in their financial statements uncertain tax positions taken or expected to be taken on a tax return. Under ASC 740, tax positions must initially be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions must initially and subsequently be measured as the largest amount of tax benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and relevant facts.

 

The Company conducts major businesses in Malaysia and Hong Kong, and is expanding to China and Thailand. The Company is subject to tax in these jurisdiction. As a result of its business activities, the Company will file tax returns that are subject to examination by the foreign tax authority.

 

  F- 8  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

Net income/(loss) per share

 

The Company calculates net income/(loss) per share in accordance with ASC Topic 260, “Earnings per Share.” Basic income/(loss) per share is computed by dividing the net income/(loss) by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income/(loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

 

Foreign currencies translation

 

Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the Condensed Consolidated Statements of Operations and Comprehensive Income.

 

The reporting currency of the Company is United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. In addition, the Company’s subsidiaries and VIEs in Malaysia, Hong Kong, China and Thailand maintains their books and record in their local currency, Ringgits Malaysia (“MYR”), Hong Kong Dollars (“HK$”), Chinese Renminbi (“RMB”) and Thai Baht (“THB”) respectively, which is functional currency as being the primary currency of the economic environment in which the entity operates.

 

In general, for consolidation purposes, assets and liabilities of its subsidiaries whose functional currency is not US$ are translated into US$, in accordance with ASC Topic 830-30, “ Translation of Financial Statement” , using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements of foreign subsidiary are recorded as a separate component of accumulated other comprehensive income within the statements of stockholders’ equity.

 

Translation of amounts from MYR into US$1, HK$ into US$1, RMB into US$1 and THB into US$1 has been made at the following exchange rates for the respective periods:

 

    As of and for the nine months ended
September 30,
 
    2018     2017  
             
Period-end MYR : US$1 exchange rate     4.14       4.42  
Period-average MYR : US$1 exchange rate     4.09       4.26  
Period-end HK$ : US$1 exchange rate     7.83       7.81  
Period-average HK$ : US$1 exchange rate     7.85       7.81  
Period-end RMB : US$1 exchange rate     6.87       6.65  
Period-average RMB : US$1 exchange rate     6.80       6.67  
Period-end THB : US$1 exchange rate     32.33       33.53  
Period-average THB : US$1 exchange rate     33.01       33.38  

 

  F- 9  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

Fair value of financial instruments:

 

The carrying value of the Company’s financial instruments: cash and cash equivalents, trade receivables, deposits, trade payable, other payables, and accounts payable approximate at their fair values because of the short-term nature of these financial instruments.

 

The Company also follows the guidance of the ASC Topic 820-10, “ Fair Value Measurements and Disclosures ” (“ASC 820-10”), with respect to financial assets and liabilities that are measured at fair value. ASC 820-10 establishes a three-tier fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

 

Level 1 : Observable inputs such as quoted prices in active markets;

 

Level 2 : Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

 

Level 3 : Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

 

Segment reporting

 

ASC Topic 280, “ Segment Reporting ” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. For the nine months ended September 30, 2018, the Company operates in four reportable operating segment in Malaysia, Thailand, China and Hong Kong.

 

Recent accounting pronouncements

 

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and 2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. The Company is evaluating this ASU and has not determined the effect of this standard on its ongoing financial reporting. 

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

 

  F- 10  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

3. VIE STRUCTURE AND ARRANGEMENTS

 

On June 27, 2016, DSwiss (HK) Limited (“DSHK”) entered into a Management Services Agreement (the “Management Services Agreement I”) which entitles DSHK to substantially entitled to all of the economic benefits of DSwiss Biotech Sdn Bhd (“DSBT”) in consideration of services provided by DSHK to DSBT. Pursuant to the Management Services Agreement I, DSHK has the exclusive right to provide to DSBT management, financial and other services related to the operation of DSBT’s business, and DSBT is required to take all commercially reasonable efforts to permit and facilitate the provision of the services provided by DSHK. As compensation for providing the services, DSHK is entitled to receive a fee from DSBT, upon demand, equal to 100% of the annual net profits of DSBT during the term of the Management Services Agreement I. DSHK may also request, on ad hoc basis, quarterly payments of the aggregate fee, which payments will be credited against DSBT’s future payment obligations.

 

The Management Services Agreement I also provides DSHK, or its designee, with a right of first refusal to acquire all or any portion of the equity of DSBT upon any proposal by the sole shareholder of DSBT to transfer such equity. In addition, at the sole discretion of DSHK, DSBT is obligated to transfer to DSHK, or its designee, any part or all of the business, personnel, assets and operations of DSBT which may be lawfully conducted, employed, owned or operated by DSHK, including:

 

(a) business opportunities presented to, or available to DSBT may be pursued and contracted for in the name of DSHK rather than DSBT, and at its discretion, DSHK may employ the resources of DSBT to secure such opportunities;

 

(b) any tangible or intangible property of DSBT, any contractual rights, any personnel, and any other items or things of value held by DSBT may be transferred to DSHK at book value;

 

(c) real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the business may be obtained by DSHK by acquisition, lease, license or otherwise, and made available to DSBT on terms to be determined by agreement between DSHK and DSBT;

 

(d) contracts entered into in the name of DSBT may be transferred to DSHK, or the work under such contracts may be subcontracted, in whole or in part, to DSHK, on terms to be determined by agreement between DSHK and DSBT; and

 

(e) any changes to, or any expansion or contraction of, the business may be carried out in the exercise of the sole discretion of DSHK, and in the name of and at the expense of, DSHK; provided, however, that none of the foregoing may cause or have the effect of terminating (without being substantially replaced under the name of DSHK) or adversely affecting any license, permit or regulatory status of DSBT.

 

In addition, DSHK entered into certain agreements with Jervey Choon, (the “DSBT shareholder”), including

 

(i) a Call Option Agreement allowing DSHK to acquire the shares of DSBT as permitted by Malaysia laws;
   
(ii) a Shareholders’ Voting Rights Proxy Agreement that provides DSHK with the voting rights of the DSBT; and
   
(ii) an Equity Pledge Agreement that pledges the shares in DSBT.

 

This VIE structure provides DSHK, a wholly-owned subsidiary of DSwiss Holding Limited, which is the wholly-owned subsidiary of DSwiss Inc, with control over the operations and benefits of DSBT without having a direct equity ownership in DSBT.

 

On June 27, 2016, DSHK entered into a Management Services Agreement (the “Management Services Agreement II”) which entitles DSHK to substantially entitled to all of the economic benefits of DS Asia Co., Ltd (“DSAC”) in consideration of services provided by DSHK to DSAC. Pursuant to the Management Services Agreement II, DSHK has the exclusive right to provide to DSAC management, financial and other services related to the operation of DSAC’s business, and DSAC is required to take all commercially reasonable efforts to permit and facilitate the provision of the services provided by DSHK. As compensation for providing the services, DSHK is entitled to receive a fee from DSAC, upon demand, equal to 100% of the annual net profits of DSAC during the term of the Management Services Agreement II. DSHK may also request, on ad hoc basis, quarterly payments of the aggregate fee, which payments will be credited against DSAC’s future payment obligations.

 

The Management Services Agreement II also provides DSHK, or its designee, with a right of first refusal to acquire all or any portion of the equity of DSAC upon any proposal by the sole shareholder of DSAC to transfer such equity. In addition, at the sole discretion of DSHK, DSAC is obligated to transfer to DSHK, or its designee, any part or all of the business, personnel, assets and operations of DSAC which may be lawfully conducted, employed, owned or operated by DSHK, including:

 

(a) business opportunities presented to, or available to DSAC may be pursued and contracted for in the name of DSHK rather than DSAC, and at its discretion, DSHK may employ the resources of DSAC to secure such opportunities;

 

  F- 11  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

(b) any tangible or intangible property of DSAC, any contractual rights, any personnel, and any other items or things of value held by DSAC may be transferred to DSHK at book value;

 

(c) real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the business may be obtained by DSHK by acquisition, lease, license or otherwise, and made available to DSAC on terms to be determined by agreement between DSHK and DSAC;

 

(d) contracts entered into in the name of DSAC may be transferred to DSHK, or the work under such contracts may be subcontracted, in whole or in part, to DSHK, on terms to be determined by agreement between DSHK and DSAC; and

 

(e) any changes to, or any expansion or contraction of, the business may be carried out in the exercise of the sole discretion of DSHK, and in the name of and at the expense of, DSHK; provided, however, that none of the foregoing may cause or have the effect of terminating (without being substantially replaced under the name of DSHK) or adversely affecting any license, permit or regulatory status of DSAC.

 

In addition, DSHK entered into certain agreements with each of Ms. Weraya Limpasuthum, Ms. Kanittha Tharanut, (collectively, the “DSAC shareholders”), including

 

(iv) a Call Option Agreement allowing DSHK to acquire the shares of DSAC as permitted by Thailand laws;
   
(v) a Shareholders’ Voting Rights Proxy Agreement that provides DSHK with the voting rights of the DSAC; and
   
(vi) an Equity Pledge Agreement that pledges the shares in DSAC.

 

This VIE structure provides DSHK, a wholly-owned subsidiary of DSwiss Holding Limited, which is the wholly-owned subsidiary of DSwiss Inc, with control over the operations and benefits of DSAC without having a direct equity ownership in DSAC.

 

  F- 12  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

4. STOCKHOLDERS’ EQUITY

 

On September 8, 2015, the Company issued a total of 200,000,000 shares of restricted common stock to two additional founders, Mr. Leong Ming Chia and Greenpro Venture Capital Limited, with a par value of $0.0001 per share for an additional working capital of $20,000.

 

On September 10, 2015, the Company further issued a total of 450,000 shares of restricted common stock to Mr. Chua Lee Yee, Mr. Cheng Zhee Long and Ms. Ng Siew Yen, with a par value of $0.0001 per share for an additional working capital of $450.

 

On September 15, 2015, the Company consummated the sale to fifty-five shareholders of the Company, of an aggregate of 2,792,600 shares of its common stocks with par value of $0.0001, at a price of $0.1 per share, or $279,260 in the aggregate, pursuant to certain subscription agreements.

 

On March 17, 2016, we have invested in DSwiss Biotech Sdn Bhd, a Company incorporated in Malaysia, and owned 40% equity interest with non-controlling interest of $33,437. On April 27, 2016, we have invested in DS Asia Co., Ltd, incorporated in Thailand, and owned 49% equity interest with non-controlling interest of $7,120. Based on the contractual arrangements between the Company and other investors, the Company has the power to direct the relevant activities of these entities unilaterally, and hence the Company has control over these entities.

 

For the year ended December 31, 2016, the Company issued an aggregate of 597,500 shares of its common stock at $0.8 per share, for aggregate gross proceeds of $478,000 for initial public offering.

 

On March 1, 2017, various note holders converted $638,400 in principal into 2,964,500 shares of common stock. The conversion price ranged from $0.1 to $0.4 per share.

 

As of September 30, 2018, the Company had a total of 206,904,600 of its common stock issued and outstanding. There are no shares of preferred stock issued and outstanding.

 

5. PROPERTY AND EQUIPMENT

 

   

As at

September 30, 2018

   

As at

December 31, 2017

 
Computers and software   $ 89,291     $ 90,268  
Furniture and fittings     6,087       3,063  
Office equipment     9,407       9,586  
Renovation     18,502       32,107  
Motor vehicles     78,823       18,843  
Total property and equipment   $ 202,110     $ 153,867  
Accumulated depreciation     (102,080 )     (97,233 )
Property and equipment, net   $ 100,030     $ 56,634  

 

Depreciation expense for the three and nine months ended September 30, 2018 were $4,571 & $18,334 respectively.

 

Depreciation expense for the three and nine months ended September 30, 2017 were $7,080 and $18,431 respectively.

 

  F- 13  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

6. INTANGIBLE ASSETS

 

   

As at

September 30, 2018

   

As at

December 31, 2017

 
Trademarks   $ 12,063     $ 11,629  
Amortization     (1,978 )     (1,417 )
Intangible assets, net   $ 10,085     $ 10,212  

 

Amortization for the three and nine months ended September 30, 2018 was $256 and $127 respectively.

 

Amortization for the three and nine months ended September 30, 2017 was $159 and $234 respectively.

 

7. PREPAID EXPENSES AND DEPOSITS

 

   

As at

September 30, 2018

   

As at

December 31, 2017

 
Prepaid expenses   $ 6,503     $ 3,334  
Deposits     33,799       65,098  
Other Receivable     7,883       7,928  
Total prepaid expenses and deposits   $ 48,185     $ 76,360  

 

8. INVENTORIES

 

   

As at

September 30, 2018

   

As at

December 31, 2017

 
Finished goods, at cost   $ 27,436     $ 19,126  
Total inventories   $ 27,436     $ 19,126  

 

9. OTHER PAYABLES AND ACCRUED LIABILITIES

 

   

As at

September 30, 2018

   

As at

December 31, 2017

 
Other payables   $ 37     $ 10,712  
Accrued audit fees     2,500       15,000  
Accrued other expenses     24,662       514  
Total payables and accrued liabilities   $ 27,199     $ 26,226  

 

  F- 14  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

10. HIRE PURCHASE PAYABLES

 

The Company purchased a motor vehicle under a finance lease agreement with the effective interest rate of 2.38% per annum, due through June, 2025, with principal and interest payable monthly. The obligation under the finance lease is as follows:

 

   

As of

September 30, 2018

   

As of

December 31, 2017

 
Finance lease   $ 68,709     $ 18,033  
Less: interest expense     (9,466 )     (2,336 )
Net present value of finance lease   $ 59,243     $ 15,697  
                 
Current portion   $ 7,600     $ 3,571  
Non-current portion     51,643       12,126  
Total   $ 59,243     $ 15,697  

 

As of September 30, 2018, the maturities of the finance lease for each of the years are as follows:

 

2018     1,862  
2019     7,702  
2020     8,113  
2021     8,523  
2022     8,934  
2023     9,344  
2024     9,754  
2025     5,011  
Total   $ 59,243  

 

11. INCOME TAXES

 

For the nine months ended September 30, 2018 and 2017, the local (United States) and foreign components of income/(loss) before income taxes were comprised of the following:

 

    2018     2017  
             
Tax jurisdictions from:                
- Local   $ (22,337 )   $ (46,155 )
- Foreign, representing                
Seychelles     (1,775 )     (1,729 )
Hong Kong     (98,682 )     (66,082 )
Malaysia     (145,316 )     (68,154 )
PRC     (17,352 )     (23,799 )
Thailand     (171 )     (455 )
                 
Loss before income tax   $ (285,633 )   $ (206,374 )

 

The provision for income taxes consisted of the following:

 

    2018     2017  
Current:                
- Local   $ -     $ -  
- Foreign     -       -  
                 
Deferred:                
- Local     -       -  
- Foreign     -       -  
                 
Income tax expense   $ -     $ -  

 

The effective tax rate in the periods presented is the result of the mix of income earned in various tax jurisdictions that apply a broad range of income tax rates. The Company has subsidiaries that operate in various countries: United States, Seychelles, Hong Kong, Malaysia, PRC and Thailand that are subject to taxes in the jurisdictions in which they operate, as follows:

 

United States of America

 

The Company is registered in the State of Nevada and is subject to the tax laws of the United States of America.

 

Seychelles

 

Under the current laws of the Seychelles, DSwiss Holding Limited is registered as an international business company which governs by the International Business Companies Act of Seychelles and there is no income tax charged in Seychelles.

 

Hong Kong

 

DSwiss (HK) Limited is subject to Hong Kong Profits Tax, which is charged at the statutory income rate of 16.5% on its assessable income.

 

Malaysia

 

DSwiss Sdn Bhd and DSwiss Biotech Sdn Bhd are subject to Malaysia Corporate Tax, which is charged at the statutory income rate range from 18% to 24% on its assessable income.

 

People’s Republic of China (PRC)

 

DSwiss International Trading (Shenzhen) Limited is operating in the PRC subject to the Corporate Income Tax governed by the Income Tax Law of the People’s Republic of China with a unified statutory income tax rate of 25%.

 

Thailand

 

DS Asia Co., Ltd is subject to the Corporate Income Tax governed by the Thailand Revenue Department. Companies and juristic partnerships with a paid-in capital not exceeding 5 million Thai baht (THB) at the end of any accounting period and income from the sale of goods and/or the provision of services not exceeding THB 30 million in any accounting period will be subject to tax range from 0% - 20%.

 

  F- 15  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

12. CONCENTRATIONS OF RISK

 

The Company is exposed to the following concentrations of risk:

 

(a) Major customers

 

For three months ended September 30, 2018 and 2017, the customers who accounted for 10% or more of the Company’s revenue and its outstanding receivable balance at period-end are presented as follows:

 

    For three months ended September 30  
    2018     2017     2018     2017     2018     2017  
    Revenues     Percentage of revenues     Accounts receivable,
trade
 
                                     
Customer A   $ 9,675       9,852       60 %     23 %   $ -       -  
Customer B     5,886       7,882       36 %     19 %     -       -  
    $ 15,561       17,734       96 %     42 %   $ -       -  

 

  F- 16  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

For nine months ended September 30, 2018 and 2017, the customers who accounted for 10% or more of the Company’s revenue and its outstanding receivable balance at period-end are presented as follows:

 

    For nine months ended September 30  
    2018     2017     2018     2017     2018     2017  
    Revenues     Percentage of revenues     Accounts receivable,
trade
 
                                     
Customer A   $ 94,237       45,000       56 %     33 %     -       -  
Customer B     -       35,945       -       27 %     -       -  
Customer C     -       19,813       -       15 %     -       -  
    $ 94,237       100,758       56 %     75 %     -       -  

 

(b) Major vendors

 

For three months ended September 30, 2018 and 2017, the vendors who accounted for 10% or more of the Company’s purchases and its outstanding payable balance at period-end are presented as follows:

 

    For three months ended September 30  
    2018     2017     2018     2017     2018     2017  
    Purchase     Percentage of
purchases
    Accounts payable,
trade
 
                                     
Vendor A   $ 28,996       4,770       86 %     64 %   $ -       -  
Vendor B     4,560       2,671       14 %     36 %     -       -  
    $ 33,556       7,441       100 %     100 %   $ -          

 

For nine months ended September 30, 2018 and 2017, the vendors who accounted for 10% or more of the Company’s purchases and its outstanding payable balance at period-end are presented as follows:

 

    For nine months ended September 30  
    2018     2017     2018     2017     2018     2017  
    Purchase     Percentage of
purchases
    Accounts payable,
trade
 
                                     
Vendor A   $ 46,394       29,216       57 %     64 %   $ -       6,539  
Vendor B     16,846       14,919       21 %     33 %     -       -  
    $ 63,240       44,135       78 %     97 %   $ -       6,539  

 

All vendors are located in Malaysia.

 

  F- 17  
 

 

DSWISS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018

(Currency expressed in United States Dollars (“US$”), except for number of shares)

(UNAUDITED)

 

13. COMMITMENTS AND CONTINGENCIES

 

(a) Rent expenses

 

For nine months ended September 30, 2018 and 2017, the Company has incurred rent expenses solely for the office premises in Malaysia on a monthly basis as follows:

 

   

Nine Months Ended

September 30, 2018

   

Nine Months Ended

September 30, 2017

 
Rent Expenses   $ 11,531     $ 9,405  
    $ 11,531     $ 9,40 5  

 

(b) Rent prepayment and deposit

 

   

As at

September 30, 2018

   

As at

December 31, 2017

 
Rent Prepayment (1)   $ 4,104     $ 3,967  
Rent Deposit (2)     16,418       1,322  
    $ 20,522     $ 3,96 7  

 

  (1) Rent prepayment solely for the office premises in Malaysia and due under a cancellable operating lease in the next six months for Malaysia office premises.
  (2) Rent deposit is refundable upon maturity of tenancy agreement and pre-maturity cancellation will be forfeited.

 

(c) The Company purchased a motor vehicle under a finance lease agreement with the effective interest rate of 2.38% per annum, due through June, 2025, with principal and interest payable monthly. The obligation under the finance lease is as follows:

 

   

As of

September 30, 2018

   

As of

December 31, 2017

 
Finance lease   $ 68,709     $ 18,033  
Less: interest expense     (9,466 )     (2,336 )
Net present value of finance lease   $ 59,243     $ 15,697  
                 
Current portion   $ 7,600     $ 3,571  
Non-current portion     51,643       12,126  
Total   $ 59,243     $ 15,697  

 

As of September 30, 2018, the maturities of the finance lease for each of the years are as follows:

 

2018     1,862  
2019     7,702  
2020     8,113  
2021     8,523  
2022     8,934  
2023     9,344  
2024     9,754  
2025     5,011  
Total   $ 59,243  

 

14. SUBSEQUENT EVENTS

 

In accordance with ASC Topic 855, “Subsequent Events “, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued, the Company has evaluated all events or transactions that occurred after September 30, 2018 up through the date was the Company presented these unaudited condensed financial statements.

 

  F- 18  
 

 

Item 2. Management’s discussion and analysis of financial condition and results of operations

 

The information contained in this quarter report on Form 10-Q is intended to update the information contained in our Annual Report on Form 10-K for the year ended December 31, 2017 and presumes that readers have access to, and will have read, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other information contained in such Form 10-K. The following discussion and analysis also should be read together with our consolidated financial statements and the notes to the consolidated financial statements included elsewhere in this Form 10-Q.

 

The following discussion contains certain statements that may be deemed “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements appear in a number of places in this Report, including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements are not guarantees of future performance and involve risks, uncertainties and requirements that are difficult to predict or are beyond our control. Forward-looking statements speak only as of the date of this quarterly report. You should not put undue reliance on any forward-looking statements. We strongly encourage investors to carefully read the factors described in our Form S-1 Amendment No.8, dated July 20, 2016 in the section entitled “Risk Factors” for a description of certain risks that could, among other things, cause actual results to differ from these forward-looking statements. We assume no responsibility to update the forward-looking statements contained in this transition report on Form 10-Q. The following should also be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto that appear elsewhere in this report.

 

Company Overview

 

DSwiss, Inc., a Nevada corporation (“the Company”) was incorporated under the laws of the State of Nevada on May 28, 2015. DSwiss Holding Limited owns 100% of DSwiss (HK) Limited, a Hong Kong Company, which owns 100% of DSwiss Sdn Bhd, the operating Malaysia Company of which is described below. In 2016, DSwiss (HK) Limited invested in DSwiss Biotech Sdn Bhd, incorporated in Malaysia, and owned 40% equity interest. DSwiss (HK) Limited also invested in DS Asia Co., Ltd, incorporated in Thailand, and owned 49% equity interest. We have incorporated a new company namely DSwiss International Trading (Shenzhen) Limited in China, with 100% equity interest owned by DSwiss (HK) Limited.

 

Our Company is a beauty supply company formed with the goal of supplying high quality beauty products directly to our clients. Our beauty supplies include, but are not limited to, beverages to assist in burning and reducing fat, anti-aging creams, and products designed to improve the overall health and physical appearance of our clients. Currently we supply our products solely in Malaysia and Hong Kong, however we have intentions to expand to Singapore, Indonesia, Thailand, Macau and China in the next year, and subsequent to that we will make efforts to expand throughout the world.

 

At this time we operate exclusively online through our website: http://www.dswissbeauty.com/

 

Our company continuously strives to improve the already high standard of our goods and services through ongoing research and market development. We are going to penetrate into South East Asia markets through the recruitment of distributors and via the social media like Facebook and Instagram. We foresee to spend a substantial amount in marketing and advertising in the coming year. At DSwiss we are determined to bring new products to markets that we have not yet explored.

 

Products which meet the definition of a medicinal scope need to be registered with the Drug Control Authority (DCA), Ministry of Health Malaysia. Manufacturing, marketing, importation and the sale of unregistered products is a violation of the Drug Control Regulations and Cosmetics Act 1984 of Malaysia and enforcement action can be taken.

 

Among the products offered by DSwiss, “Coffee Plus”, “Kiwi Cell Detox” and “Triple Stem Cell” are not controlled by the DCA since the medicinal component of the products is no more than 20%.

 

For the remaining products offered by DSwiss, “Silk Mask”, “Coffee Slimming Scrub” and “Peppermint Slimming Gel” are classified as drug and cosmetic items and need to be registered with the DCA. These products have been approved by DCA with a validity period for 2 years starting from December 2016.

 

  2  
 

 

We always strive to offer products as high quality as possible, and hope that this assurance from an esteemed regulatory body will also serve to prove our continuing commitment to providing quality goods.

 

DSwiss have own brand Quantum Resonant Magnetic Analyzer which is DSwiss Quantum Resonant Magnetic Analyzer. DSwiss Quantum Resonant Magnetic Analyzer is a Hi-tech innovation project, which is related to medical, bio-informatics, electronic engineering, etc. It is based on quantum medical, and scientifically analyzes the human cell’s weak magnetic field collected by advanced electronic device. The analyzer can work out the customer’s health situation and main problem. According to the checking result, the analyzer can figure out the reasonable treatment recommendation. The quantum resonant magnetic analyzer is the individualized guide of comprehensive healthy consulting and updated healthy sciences, and its characteristics and advantages are comprehensive, non-invasive, practical, simple, quick, economical and easy to popularize. We can see DSwiss Quantum Resonant Magnetic Analyzer can help our customers to more concern about their health and skin condition.

 

Our expected growth is planned to occur primarily through the implementation of our social media marketing strategy. DSwiss already has a strong relationship with social media (eg. Facebook, Instagram and Wechat). The global presence social media has helped provide to us has been an invaluable resource, and as we continue to expand our business operations and spread our brand awareness we intend to primarily utilize social media to reach our customers. The benefits of social media are countless, but perhaps the most imperative to our future success is our ability to connect with customers directly, to receive their feedback almost instantaneously. On that note, the feedback we have received from our clients has been overwhelmingly positive, which has helped us to create a robust brand image.

 

While DSwiss has been focused almost exclusively upon pursuing operations within Asia, we do have plans to expand outward and become a household name across the world. Our strategy to do so going forward is by forming partnerships with local companies in various countries that may be willing to stock our products or promote them to their own customers. We believe that by forging strategic relationships and partnerships we can expand our operations across the globe at a greater pace and with greater certainty than we would if we tried to expand on our own.

 

Results of Operation

 

For the Three and Nine Months Ended September 30, 2018 and September 30, 2017.

 

For the three and nine months ended September 30, 2018, we generated a revenue of $16,254 and $168,442 respectively, while for the three and nine months ended September 30, 2017 we realized revenues in the amount of $42,367 and $135,433 respectively. We suffered gross losses for the three ended September 30, 2018 amounted to $17,867. We attribute the gross losses suffered for this period was mainly due to the increase in cost of revenue as compare to the revenue obtained. However, we managed to generate gross profits of $29,973 for nine months ended September 30, 2018, which still resulted lower than $43,249 and $112,727 for the three and nine months ended September 30, 2017 respectively. We attribute the increase in revenue and decrease of gross profit due to higher cost of revenue in 2018. We believe that in order to improve the gross profit margin, we must look for alternative suppliers of services and material to reduce the cost or retain and attract more customers in the future by increasing our marketing efforts and or develop new products.

 

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*Our gross margins may not be comparable to those of other entities, since some entities include all the costs related to their distribution network in cost of revenue. Our cost of revenue includes only the purchase cost of products and packing materials, and does not include any allocation of inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, and the other costs associated with the distribution network.

 

Our net losses for the three and nine months ended September 30, 2018 were $114,497 and $286,247 respectively, while for the three and nine months ended September 30, 2017 were $69,219 and $206,374 respectively. We attribute this increase due to additional cost incurred to increase product sales and market share.

 

The introduction of Malaysia Goods & Services Tax (GST) is still has effect on the selling price and hence the revenue. Malaysia Goods & Services Tax of 6% was implemented on April 1, 2015. It has therefore been the primary cause as the resultant of the total increase of selling price on the products that are offered by the Company. However, Malaysia Goods & Services Tax of 6% has been reduced to 0% from June 1, 2018 until the reintroduction of Sales and Services Tax that was implemented on September 1, 2018.

 

The cost of sales also increased because of the increase in revenue.

 

The increases in general and administrative expenses are a result of advertising and compliance costs as a public company.

 

Liquidity and Capital Resources

 

For the nine months ended September 30, 2018, we had cash and cash equivalents of $236,458. We have negative operating cash flows and our working capital has been and will continue to be significant. As a result, we depend substantially on our previous financing activities to provide us with the liquidity and capital resources we need to meet our working capital requirements and to make capital investments in connection with ongoing operations. The Company expects its current capital resources to meet our basic operating requirements for approximately twelve months.

 

Operating Activities

 

For the nine months ended September 30, 2018, net cash used in operating activities was $219,737, compared to net cash used of $230,912 in the prior year. The operating cash flow performance primarily reflects the decrease in trade payable, increase in prepayment deposits, resulted net loss as well as depreciation and amortization compared to the prior year.

 

Investing Activities

 

For the nine months ended September 30, 2018, net cash used in investing activities was $64,456, reflecting the cost in purchase of property, plant and equipment and proceed from disposal of property, plant and equipment. For the nine months ended September 30, 2017, net cash used in investing activities was $756, reflecting the cost in register of trademarks.

 

Financing Activities

 

For the nine months ended September 30, 2018, net cash provided by financing activities was $32,251 resulted from the proceeds from bank loans. For the nine months ended September 30, 2017, net cash decreased by finance activities was $6,262 resulted from hire purchase financing and a conversion of notes payable to share capital amounted to $638,400.

 

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Capital Expenditures

 

Our capital expenditures primarily relate to the acquisition of property and equipment. Capital expenditures of $80,373 have been incurred for the nine months periods ended September 30, 2018.

 

Credit Facilities

 

We have credit access to as the Company purchased a motor vehicle under a finance lease agreement with the effective interest rate of 2.38% per annum, due through June, 2025, with principal and interest payable monthly.

 

Contractual Obligations, Commitments and Contingencies

 

We currently have a lease agreement in place with respect to purchase a motor vehicle in Malaysia to commence our business operations.

 

Off-balance Sheet Arrangements

 

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders as of September 30, 2018.

 

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Recent accounting pronouncements

 

In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required recognize the following for all leases (with the exception of short-term leases) at the commencement date: 1) A lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and 2) A right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those years. The Company is evaluating this ASU and has not determined the effect of this standard on its ongoing financial reporting. 

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations

 

Additional Information

 

VIE STRUCTURE AND ARRANGEMENTS

 

On June 27, 2016, DSwiss (HK) Limited (“DSHK”) entered into a Management Services Agreement (the “Management Services Agreement I”) which entitles DSHK to substantially entitled to all of the economic benefits of DSwiss Biotech Sdn Bhd (“DSBT”) in consideration of services provided by DSHK to DSBT. Pursuant to the Management Services Agreement I, DSHK has the exclusive right to provide to DSBT management, financial and other services related to the operation of DSBT’s business, and DSBT is required to take all commercially reasonable efforts to permit and facilitate the provision of the services provided by DSHK. As compensation for providing the services, DSHK is entitled to receive a fee from DSBT, upon demand, equal to 100% of the annual net profits of DSBT during the term of the Management Services Agreement I. DSHK may also request ad hoc quarterly payments of the aggregate fee, which payments will be credited against DSBT’s future payment obligations.

 

The Management Services Agreement I also provides DSHK, or its designee, with a right of first refusal to acquire all or any portion of the equity of DSBT upon any proposal by the sole shareholder of DSBT to transfer such equity. In addition, at the sole discretion of DSHK, DSBT is obligated to transfer to DSHK, or its designee, any part or all of the business, personnel, assets and operations of DSBT which may be lawfully conducted, employed, owned or operated by DSHK, including:

 

(a) business opportunities presented to, or available to DSBT may be pursued and contracted for in the name of DSHK rather than DSBT, and at its discretion, DSHK may employ the resources of DSBT to secure such opportunities;

 

(b) any tangible or intangible property of DSBT, any contractual rights, any personnel, and any other items or things of value held by DSBT may be transferred to DSHK at book value;

 

(c) real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the business may be obtained by DSHK by acquisition, lease, license or otherwise, and made available to DSBT on terms to be determined by agreement between DSHK and DSBT;

 

(d) contracts entered into in the name of DSBT may be transferred to DSHK, or the work under such contracts may be subcontracted, in whole or in part, to DSHK, on terms to be determined by agreement between DSHK and DSBT; and

 

(e) any changes to, or any expansion or contraction of, the business may be carried out in the exercise of the sole discretion of DSHK, and in the name of and at the expense of, DSHK; provided, however, that none of the foregoing may cause or have the effect of terminating (without being substantially replaced under the name of DSHK) or adversely affecting any license, permit or regulatory status of DSBT.

 

In addition, DSHK entered into certain agreements with Jervey Choon, (the “DSBT shareholder”), including

 

(i) a Call Option Agreement allowing DSHK to acquire the shares of DSBT as permitted by Malaysia laws;
   
(ii) a Shareholders’ Voting Rights Proxy Agreement that provides DSHK with the voting rights of the DSBT; and
   
(iii) an Equity Pledge Agreement that pledges the shares in DSBT.

 

This VIE structure provides DSHK, a wholly-owned subsidiary of DSwiss Holding Limited, which is the wholly-owned subsidiary of DSwiss Inc, with control over the operations and benefits of DSBT without having a direct equity ownership in DSBT.

 

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On June 27, 2016, DSHK also entered into a Management Services Agreement (the “Management Services Agreement II”) which entitles DSHK to substantially entitled to all of the economic benefits of DS Asia Co., Ltd (“DSAC”) in consideration of services provided by DSHK to DSAC. Pursuant to the Management Services Agreement II, DSHK has the exclusive right to provide to DSAC management, financial and other services related to the operation of DSAC’s business, and DSAC is required to take all commercially reasonable efforts to permit and facilitate the provision of the services provided by DSHK. As compensation for providing the services, DSHK is entitled to receive a fee from DSAC, upon demand, equal to 100% of the annual net profits of DSAC during the term of the Management Services Agreement II. DSHK may also request ad hoc quarterly payments of the aggregate fee, which payments will be credited against DSAC’s future payment obligations.

 

The Management Services Agreement II also provides DSHK, or its designee, with a right of first refusal to acquire all or any portion of the equity of DSAC upon any proposal by the sole shareholder of DSAC to transfer such equity. In addition, at the sole discretion of DSHK, DSAC is obligated to transfer to DSHK, or its designee, any part or all of the business, personnel, assets and operations of DSAC which may be lawfully conducted, employed, owned or operated by DSHK, including:

 

(a) business opportunities presented to, or available to DSAC may be pursued and contracted for in the name of DSHK rather than DSAC, and at its discretion, DSHK may employ the resources of DSAC to secure such opportunities;

 

(b) any tangible or intangible property of DSAC, any contractual rights, any personnel, and any other items or things of value held by DSAC may be transferred to DSHK at book value;

 

(c) real property, personal or intangible property, personnel, services, equipment, supplies and any other items useful for the conduct of the business may be obtained by DSHK by acquisition, lease, license or otherwise, and made available to DSAC on terms to be determined by agreement between DSHK and DSAC;

 

(d) contracts entered into in the name of DSAC may be transferred to DSHK, or the work under such contracts may be subcontracted, in whole or in part, to DSHK, on terms to be determined by agreement between DSHK and DSAC; and

 

(e) any changes to, or any expansion or contraction of, the business may be carried out in the exercise of the sole discretion of DSHK, and in the name of and at the expense of, DSHK; provided, however, that none of the foregoing may cause or have the effect of terminating (without being substantially replaced under the name of DSHK) or adversely affecting any license, permit or regulatory status of DSAC.

 

In addition, DSHK entered into certain agreements with each of Ms. Wereya Limpasuthum, Ms. Kanittha Tharanut, (collectively, the “DSAC shareholders”), including

 

(iv) a Call Option Agreement allowing DSHK to acquire the shares of DSAC as permitted by Thailand laws;
   
(v) a Shareholders’ Voting Rights Proxy Agreement that provides DSHK with the voting rights of the DSAC; and
   
(vi) an Equity Pledge Agreement that pledges the shares in DSAC.

 

This VIE structure provides DSHK, a wholly-owned subsidiary of DSwiss Holding Limited, which is the wholly-owned subsidiary of DSwiss Inc, with control over the operations and benefits of DSAC without having a direct equity ownership in DSAC.

 

Item 3 Quantitative and Qualitative Disclosures About Market Risk.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

Item 4 Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures:

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2018. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2018, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses which have caused management to conclude that, as of September 30, 2018, our disclosure controls and procedures were not effective: (i) inadequate segregation of duties and effective risk assessment; and (ii) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both US GAAP and SEC guidelines.

 

Changes in Internal Control over Financial Reporting:

 

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We know of no material, active or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceedings or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any beneficial shareholder are an adverse party or has a material interest adverse to us.

 

Item 1A. Risk Factors.

 

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

 

Item 3. Defaults Upon Senior Securities

 

None

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

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ITEM 6. Exhibits

 

Exhibit No.   Description
31.1   Rule 13(a)-14(a)/15(d)-14(a) Certification of principal executive officer*
32.1   Section 1350 Certification of principal executive officer *
101.INS   XBRL Instance Document*
101.SCH   XBRL Schema Document*
101.CAL   XBRL Calculation Linkbase Document*
101.DEF   XBRL Definition Linkbase Document*
101.LAB   XBRL Label Linkbase Document*
101.PRE   XBRL Presentation Linkbase Document*

 

* Filed herewith.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  DSWISS, INC.
  (Name of Registrant)
     
Date: November 13, 2018    
     
  By: /s/ Leong Ming Chia
  Title: President, Chief Executive Officer,
Chief Financial Officer, Treasurer, Secretary and Director
    (Principal Executive Officer, Principal Financial Officer)

 

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EXHIBIT 31.1

 

CERTIFICATION

 

I, LEONG MING CHIA, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of DSwiss, Inc. (the “Company”) for the quarter ended September 30, 2018;

 

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b. Designed such internal control over financial reporting, or caused such internal control to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
     
  c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: November 13, 2018    
     
  By: /s/ Leong Ming Chia
    LEONG MING CHIA
    President, Chief Executive Officer,
Chief Financial Officer, Treasurer, Secretary and Director
    (Principal Executive Officer, Principal Financial Officer)

 

 
 

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of DSwiss, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), The undersigned hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

 

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Date: November 13, 2018    
     
  By: /s/ Leong Ming Chia
    LEONG MING CHIA
    President, Chief Executive Officer,
Chief Financial Officer, Treasurer, Secretary and Director
    (Principal Executive Officer, Principal Financial Officer)

 

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.